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yobo
Registered: Jul 2007
Posts: 157 |
09-02-08 07:14 PM
My database identidies pairs when the ratio is out of whack...beyond two std. dev's. Plus I track RSI and a few other conditions.
Typically, when my system identifies a pair, I'll put it on my radar and watch throughout the day and enter at end of day. Since the pair is highly correlated meaning they should trade in tandem, I'll look for a day that is out of whack like last Friday. CF was quite strong and POT was quite weak. I netered a layer near the close. Today we see some mean reversion and POT outperforming CF. Trade becomes profitable. at the end of day I'll take those profits and maybe even consider flipping it given the underperformance of cf versus pot today.
Make sense? Another pair that showed up on the radar was long ir and short itw based on Friday closing prices. Today IR is down and itw is up. At the end of day, I'll go long ir and short itw.
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yobo
Registered: Jul 2007
Posts: 157 |
09-02-08 07:20 PM
Here's another example. Long MOS short MON. MOS is taking it on the chin today compared to MON. MOS is down 8% versus MON down 4.48%.
Pretty good odds that tomorrow the returns will reverse and MOS will outperform MON assuming MOS stays weaker than MON.
No real science involved other than buying weakness and shorting strength.
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yayt
Registered: Dec 2007
Posts: 271 |
09-02-08 09:29 PM
I've been following the thread and yobo, I agree, your MOS/MON trade looks good, I wish I had entered it at the close. If it doesn't gap up then I think I will enter.
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jonnysharp
Registered: May 2004
Posts: 980 |
09-03-08 12:45 AM
Was talking with some other experienced pair traders today, they expect the next several years will be great for pair trading, range-bound markets, high volatility & hedge fund closures, good for us I guess.
Closed 2nd trade today for a profit:
Sold GOOG @ 465.25
Covered AAPL @ 166.19
Opened 2 new trades:
Long GENZ @ 77.84
Short BAX @ 69.79
Long APA @ 106.34
Short ECA @ 71.26
Open Trades: 13
 bax-genz.gif
This has been downloaded 427 time(s).
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Joab
Registered: Jul 2006
Posts: 2221 |
09-03-08 03:51 AM
Quote from yobo:
Here's another example. Long MOS short MON. MOS is taking it on the chin today compared to MON. MOS is down 8% versus MON down 4.48%.
Pretty good odds that tomorrow the returns will reverse and MOS will outperform MON assuming MOS stays weaker than MON.
No real science involved other than buying weakness and shorting strength.
BUY Strength and SELL weakness.
You will be much happier once you adopt this attitude.
Long CF / 725 shares @ $138, Short POT / 615 shares @ $162
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jonnysharp
Registered: May 2004
Posts: 980 |
09-03-08 05:36 AM
Joab, interesting to see your on the other side of our CF/POT trade, would be pretty cool if we could both profit being on opposite trades. when are you thinking of exiting? any stops or targets in place?
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